Is Wang-Zheng Berhad (KLSE:WANGZNG) Using Debt Sensibly?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Wang-Zheng Berhad (KLSE:WANGZNG) makes use of debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Wang-Zheng Berhad's Debt?

You can click the graphic below for the historical numbers, but it shows that Wang-Zheng Berhad had RM58.7m of debt in March 2025, down from RM62.1m, one year before. However, its balance sheet shows it holds RM84.6m in cash, so it actually has RM25.9m net cash.

How Strong Is Wang-Zheng Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Wang-Zheng Berhad had liabilities of RM80.7m due within 12 months and liabilities of RM203.0k due beyond that. On the other hand, it had cash of RM84.6m and RM71.2m worth of receivables due within a year. So it can boast RM74.9m more liquid assets than total liabilities.

This surplus liquidity suggests that Wang-Zheng Berhad's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Simply put, the fact that Wang-Zheng Berhad has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is Wang-Zheng Berhad's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for Wang-Zheng Berhad

In the last year Wang-Zheng Berhad wasn't profitable at an EBIT level, but managed to grow its revenue by 15%, to RM319m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Wang-Zheng Berhad?

Although Wang-Zheng Berhad had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of RM107k. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. There's no doubt the next few years will be crucial to how the business matures. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 5 warning signs for Wang-Zheng Berhad you should be aware of, and 3 of them are a bit unpleasant.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.